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10/02/2015 ObamaCare Open Enrollment Begins- Fraud-Enabling Front End, Collapsing Co-Ops, Constitutional Challenge (Part A)

http://www.nakedcapitalism.com/2015/11/obamacare-open-enrollment-begins-fraud-enabling-front-end-collapsing-co-ops-constitutional-challenge.html

This post is a round-up of the current issues in the never-ending saga of ObamaCare, Rube Goldberg device (an example for those who came in late[1]). There are three current issues:

The new and improved ObamaCare website. Does it make “smart shopping” possible? Spoiler alert: No.

2) The collapse of ObamaCare co-ops. Was it pre-ordained when ObamaCare was passed? Spoiler alert: Yes, but there’s unexpected hope.

3) The current court challenge to ObamaCare, Sissel. What does it tell us about Democrats?

(There’s plenty more to cover — premium increases, for one, as well as the actual policies made available — but these three issues are the hot stories right now.)

The ObamaCare Website

Since citizens consumers of ObamaCare mostly do their shopping online, the design of the exchanges (the “marketplace” website) is thought to be critical to their finding the best “deal.” In reality, purchasing health insurance on the exchanges is a lemon market, full of information asymmetries, and purchasing health care itself is a lemon market, for the same reason, so ObamaCare’s fundamental premises — that consumers can drive health care costs down, and quality up, through “smart shopping” — is a double-bind of enormous proportions; citizens consumers cannot do the very thing that ObamaCare (and the political class (and economists)) demand that they do. The entire premise of ObamaCare is false, and a better website can’t fix this.

ObamaCare’s premise that health care citizens consumers are smart shoppers is false. The New York Times cites a new study:
Eric Johnson, a Columbia business professor, led a study that found that without substantial additional assistance, a consumer’s likelihood of selecting the lowest-cost plan is no better than chance. The researchers conducted a series of experiments on people similar to those who would shop for marketplace coverage. Each study participant was asked to presume he’d use a certain amount of health care and, based on that, to choose the lowest-cost plan from among eight choices, which varied by premium, doctor co-pay and deductible. Only 21 percent could accomplish this task, a figure not statistically different from chance. The annual cost of errors was about $250.

$250 may not seem like much to you and me [snort], but over 10 million citizens consumers, it adds up to a nice chunk of change. (Of course, that $250 is just the hidden fee for entering the system, not the co-pay or deductible or balance billing for out-of-network care; that comes later.)
With this background, we can look at this year’s improvements to the Federal ObamaCare website, used by most states (and which I’ll have to use as a proxy for websites hosted by individual states).

Recall that ObamaCare (to give credit) greatly limits the amount of underwriting that health insurance companies can do (for example, they must accept applicants with pre-existing conditions) and therefore takes away a major source of their profits. The insurance companies, naturally enough, then attempt to make up for the loss by raising profits elsewhere. Chief among their techniques (so far) is the narrow network, which limits the doctors available under any given plan.

Narrow networks raise profits in at least three ways: First, the insurance companies can make deals with medical service providers to get a better price. Second, by not including certain kinds of specialists on their lists, the insurance companies can do underwriting through the back door; for example, if they don’t want to insure against a certain sort of cancer, they simply don’t include specialists who treat that cancer. Third, a narrow network often means that travel times to the nearest service provider may be high, a deterrent to seeking care.

(There’s also the profitable outcome that rates, and profits, for out-of-network heatlh care, are not capped, so players run s**ms to kick sick people out-of-network while they’re being treated, and stick them with a huge surprise bill.)[2]

Now, consumers understand, even if neoliberal economists do not, that health care is a lemon market in which “smart shopping” is extremely difficult; as we’ve seen above, only 21% of the population can do anything remotely approaching it.

(Especially on a gurney in the back of an ambulance, right?) Therefore, they fall back on heuristics, like trust (“you can keep your doctor”), or a history of success (“first, do no harm”), or a doctor’s reputation in their social circle. To be fair to the economists, a minority of the 21% minority, mostly those with serious diseases, can, smartly or desperately, manage to make lemonade by cobbling together their own personal health care strategy involving the right specialist, the right drugs, the right clinic, and the right treatment.

Both for heuristic and strategic citizens consumers, it’s critical to know whether their doctor is in-network for any health insurance policy available on the ObamaCare website.

So we would naturally expect that the ObamaCare website makes it possible and easy to find this out. Dream on. Of course, if you read this lead from US News (October 23) you might be deceived:
Like a car company bringing out a new model, the Centers for Medicare and Medicaid Services will debut a shiny and improved website Sunday that will allow people to see whether the plan they pick would cover particular doctors, prescriptions and hospitals.

(Notice the sleight of hand here: The claim that purchasing health insurance is like buying a new car. It isn’t. It’s like buying a used car; see Akerlof’s classic paper on lemon markets, where purchasing a used car is the paradigmatic example of information asymmetry.) But do undecieve yourself, read on, and read carefully:
Consumers [sic] can also search for a specific doctor, or available prescription or hospital that is covered by their plan. Previously, customers had to go to each insurer’s website to find out.

Changes in coverage [that is, churn; see NC here]. can mean that patients lose access to family doctors they have been seeing for years, or may not be able to undergo medical tests or procedures in the hospital that is closest to where they live. Some consumers may decide a lower premium is worth such changes, and others many not, said Lori Lodes, communications director for the CMS.

Right now the agency has collected about half of issuer data, she said.

“Half the data.” So, three years into ObamaCare, and six years since the law was passed, the administration has made half of the data “smart shoppers” would need to make informed decisions available.

First, BWA-HA-HA-HA-HA-HA-HA!!!! Second, why isn’t this fraud? But wait. There’s more! From AP (November 1):

Doctor and prescription look-up tools that were supposed to be showcase improvements this year are still in final testing and could turn out to be less than reliable.

“Could turn out to be less than reliable.” First, BWA-HA-HA-HA-HA-HA-HA!!!! I mean, it’s not like the ObamaCare website has ever been “less than reliable” before! (And if the administration runs true to form, nobody will be held accountable for any debacle, and the program managers will turn Flexian and go on to lucrative private sector jobs.)

Second, now we’ve got three layers of lemony goodness: Health care is a lemon market, health insurance is a lemon market, and the ObamaCare marketplace expects people to remedy the information asymmetries of these lemon markets with lemon software that not only lacks critical information, but is buggy. Third, ObamaCare is a product that people are mandated to buy. Surely there is some legal theory that explains how a mandate that forces people to buy a defective product cannot stand, constitutionally?

For example, suppose there were a statute that mandated that every American purchase a gun, but that the gun manufacturing process inherently caused a certain number of guns to misfire, or discharge when dropped. Surely there is a theory under which such a mandate could be challenged?

As AllGov drily points out:

Obamacare is not single-payer, Medicare-for-all, insurance. It’s a marketplace driven by consumer choice, which doesn’t work very well without information about provider networks.

No, it doesn’t. And remember the incentives that health insurance companies have: If they can no longer do underwriting, they’ll try to do backdoor underwriting. So we’ll have an arms race; if, at some future date, HHS manages to get the other half of their data, and debug their software, the insurance companies will have figured out some other way to game the system in the name of profit.

End Part A